Inflation to remain between 6.5-7.5 percent: Mukherjee (Lead)

New Delhi, June 14 (IANS) Finance Minister Pranab Mukherjee Thursday said he is “confident” that the headline inflation will remain between 6.5-7.5 percent in 2012-13, even as the government takes remedial measures to control rising food prices.

“I’m confident that range of inflation will be around 6.5-7.5 percent throughout the year,” Mukherjee told reporters here.

He also hoped that a good monsoon would help curb inflationary pressure.

“I hope if the monsoon is quite good, then it will be possible that this type of pressures will be sorted out,” he said.

He also said the government would take remedial measures to curb food inflation by addressing supply side bottlenecks.

India’s inflation moved up to 7.55 percent in May as compared to 7.23 percent in the previous month, mainly driven by a sharp increase in the price of food items, which added to the woes of policy makers as the economic growth remains under pressure.

The monthly inflation based on wholesale price index (WPI) was 9.56 percent during the corresponding month of the previous year.

Food inflation surged to double digits in May. It rose to 10.74 percent in May as compared to 8.25 percent in the previous month as vegetables, pulses, milk, egg, meat and fish became costlier, pinching the pockets of common people.

Food inflation had re-entered the double-digit zone after a gap of six months in April and the trend continued in May.

Prices of vegetables surged by 49.43 percent year-on-year. Potato price went up by 68.10 percent. Milk became costlier by 11.90 percent. Prices of eggs, meat and fish rose by 17.89 percent. Pulses became costlier by 16.61 percent.

Mukherjee said food inflation was partly impacted due to seasonality of some of the food items such as pulses and vegetables.

“These (pulses and vegetable) are the commodities in which prices have increased,” he said.

Prices of manufactured products increased by 5.02 percent year-on-year, while price of fuel and power grew by 11.53 percent. Petrol prices went up by 10.51 percent.

In May, the three state-owned oil marketing companies hiked petrol prices by Rs.6.28 a litre excluding local taxes, the steepest such hike in recent times.

The companies later retracted the hike by Rs.2 per litre due to the falling global crude prices.

However, petrol as an item has lower weightage in the wholesale price index of about 1.09 basis points and does not primary impact the headline inflation.

Diesel on the other hand has a higher weightage in the index of about 50-75 basis points due to larger usage in the transportation sector. High speed diesel prices went up by 9.24 percent.

The recent data showed that India continued to face the problem of high inflationary pressure and low growth.

As per the data released by the Central Statistics Office last week, India’s industrial output grew marginally by 0.1 percent in April due to poor show of mining and manufacturing sectors.

The factory output, measured in terms of the Index of Industrial Production (IIP), had declined by 3.5 percent in industrial production in March, the first such contraction in factory output since October 2011, when it shrank by 4.7 percent.

The sharp fall in factory output is expected to put pressure on the central bank to cut key interest rates.

The Reserve Bank of India is scheduled to hold its mid-quarterly policy review next week.